The Deal
Wednesday, October 22, 
7:03 pm

by Donna Block
[Posted on January 16, 2008 - 9:41 AM]

After rejecting an earlier overture from Oracle Corp., middleware maker BEA Systems Inc. has finally been won over by an offer of $19.38 per share or $8.5 billion.

BEA had rejected an earlier unsolicited $6.7 billion or $17 per share bid from Oracle in October, calling the offer "unacceptable.'' BEA said then that it would agree to negotiate at a price of $21, which Oracle said was too high.

While the purchase price of $19.38 announced Wednesday is lower than the $21 BEA originally said it would consider, it is a premium of roughly 24.4% from BEA's closing price Tuesday of $15.58. Oracle noted that the deal is valued at $7.2 billion net of the target's $1.3 billion cash on hand.

"The addition of BEA products and technology will significantly enhance and extend Oracle's Fusion middleware software suite," said Oracle CEO Larry Ellison. Middleware is a general term for any software that sits between two separate and often already existing programs, enabling them to work together.

BEA chairman and CEO Alfred Chuang said the board and independent advisers had reviewed a number of ways to maximize shareholder value and called the Oracle deal the culmination of a "diligent and thoughtful process" to maximize stockholder value.

The San Jose, Calif.-based company also faced pressure from its biggest shareholder, activist investor Carl Icahn, who has a 13.2% stake and sued in Delaware demanding that shareholders gain the right to vote in a sale.

Oracle president Charles Phillips said the transaction will not only advance the Redwood Shores Calif.-based company's adoption of middleware technologies but also "extend our strategic relationships with customers and partners; and increase our penetration in key regions like China."

The BEA Systems board has unanimously approved the transaction. It is anticipated to close by mid-2008, subject to BEA stockholder approval, certain regulatory approvals and customary closing conditions.

Oracle expects the buyout to boost earnings by one cent to two cents a share, excluding items, in the first year after the deal closes.

The buyer has been tenacious in its acquisition strategy, spending more than $25 billion for nearly 40 companies over the last few years. The deal with BEA will make Oracle the No. 2 player in the middleware market behind IBM Corp. Oracle and BEA currently share second place.

Investors, analysts and arbitrageurs had been contemplating the notion of a bidding war for BEA, but no suitors stepped up. There had been some speculation that Hewlett-Packard Co. of Palo Alto, Calif., may be interested or that Germany's SAP AG may step forward. But neither company made an overture. SAP recently struck a $7 billion deal to buy France's Business Objects SA, which also competes with BEA.

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